In the circular flow model, households and firms interact in what two markets?

In the circular flow model, households and firms interact primarily in the resource market and the product market. The resource market is where households provide factors of production—such as labor, land, and capital—to firms. In exchange for these resources, firms pay households wages, rent, and interest, thereby facilitating the flow of money and inputs necessary for production.

On the other side, in the product market, firms offer finished goods and services to households, which in turn use their income earned from the resource market to purchase these products. This dual interaction creates a continuous cycle where resources are provided for production, and in return, households obtain goods and services that meet their consumption needs.

The other options do not accurately capture the interactions that define the circular flow model. For example, capital and service markets do not encompass the full range of exchanges between households and firms as required by the model.